Reviewing Vereit (VER) & Realty Income (O)

Realty Income (NYSE: O) and Vereit (NYSE:VER) are both mid-cap financials companies, but which is the better business? We will contrast the two companies based on the strength of their profitability, valuation, analyst recommendations, risk, earnings, dividends and institutional ownership.

Valuation & Earnings

This table compares Realty Income and Vereit’s revenue, earnings per share (EPS) and valuation.

Gross Revenue Price/Sales Ratio Net Income Earnings Per Share Price/Earnings Ratio
Realty Income $1.10 billion 13.61 $315.57 million $1.22 43.67
Vereit $1.45 billion 5.03 -$195.86 million ($0.13) -57.77

Realty Income has higher earnings, but lower revenue than Vereit. Vereit is trading at a lower price-to-earnings ratio than Realty Income, indicating that it is currently the more affordable of the two stocks.

Insider and Institutional Ownership

69.9% of Realty Income shares are held by institutional investors. Comparatively, 85.2% of Vereit shares are held by institutional investors. 0.3% of Realty Income shares are held by company insiders. Comparatively, 0.1% of Vereit shares are held by company insiders. Strong institutional ownership is an indication that hedge funds, endowments and large money managers believe a company will outperform the market over the long term.

Analyst Recommendations

This is a breakdown of recent ratings and recommmendations for Realty Income and Vereit, as provided by MarketBeat.

Sell Ratings Hold Ratings Buy Ratings Strong Buy Ratings Rating Score
Realty Income 0 6 3 0 2.33
Vereit 0 1 2 0 2.67

Realty Income currently has a consensus target price of $66.60, suggesting a potential upside of 25.00%. Vereit has a consensus target price of $9.50, suggesting a potential upside of 26.50%. Given Vereit’s stronger consensus rating and higher probable upside, analysts plainly believe Vereit is more favorable than Realty Income.

Volatility & Risk

Realty Income has a beta of 0.29, indicating that its share price is 71% less volatile than the S&P 500. Comparatively, Vereit has a beta of 0.75, indicating that its share price is 25% less volatile than the S&P 500.

Dividends

Realty Income pays an annual dividend of $2.55 per share and has a dividend yield of 4.8%. Vereit pays an annual dividend of $0.55 per share and has a dividend yield of 7.3%. Realty Income pays out 209.0% of its earnings in the form of a dividend, suggesting it may not have sufficient earnings to cover its dividend payment in the future. Vereit pays out -423.1% of its earnings in the form of a dividend. Realty Income has raised its dividend for 22 consecutive years and Vereit has raised its dividend for 2 consecutive years. Vereit is clearly the better dividend stock, given its higher yield and lower payout ratio.

Profitability

This table compares Realty Income and Vereit’s net margins, return on equity and return on assets.

Net Margins Return on Equity Return on Assets
Realty Income 29.37% 5.11% 2.64%
Vereit -3.76% -0.61% -0.34%

Summary

Realty Income beats Vereit on 10 of the 17 factors compared between the two stocks.

Realty Income Company Profile

Realty Income Corporation is a real estate investment trust (REIT). The Company is engaged in in-house acquisition, portfolio management, asset management, credit research, real estate research, legal, finance and accounting, information technology and capital markets capabilities. As of December 31, 2016, the Company owned a diversified portfolio of 4,944 properties located in 49 states and Puerto Rico, with over 83.0 million square feet of leasable space leased to 248 different commercial tenants doing business in 47 separate industries. As of December 31, 2016, of the 4,944 properties in the portfolio, 4,920, or 99.5%, were single-tenant properties, and the remaining were multi-tenant properties. As of December 31, 2016, of the 4,920 single-tenant properties, 4,836 were leased with a weighted average remaining lease term (excluding rights to extend a lease at the option of the tenant) of approximately 9.8 years.

Vereit Company Profile

VEREIT, Inc. is a full-service real estate operating company. The Company owns and manages a diversified portfolio of retail, restaurant, office and industrial real estate assets. It operates through two segments: real estate investment (REI) segment and its investment management segment, Cole Capital. The Company manages real estate investments on behalf of the Cole Capital. The Cole Capital segment sponsors and manages direct investment real estate programs, which primarily include publicly registered, non-traded real estate investment trusts (REITs). The Cole Capital segment’s operations are conducted through Cole Capital Advisors, Inc. (CCA), which is a subsidiary of the Operating Partnership. The Company’s portfolio consists of Industrial distribution, shopping centers and single-tenant retail. The Company serves in various industries, such as casual dining restaurants, manufacturing, quick service restaurants, grocery and super market, home and garden retail and logistics.

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